Genesis and Function: SEBI was created in 1988 to reform and regulate the securities markets in India. It was given statutory powers in 1992 and assigned the following functions and responsibilities: · Make rules and regulations for various agencies connected with the securities markets. · Supervise and monitor the functioning of these agencies, including stock exchanges, to ensure that they follow the rules. · Protect investors from fraudulent and unfair trade practices. · Conduct necessary research for its function and undertake education and training of investors and intermediaries. Reforms and Impact: the two main areas where SEBI took initiative after receiving statutory powers were: a) making rules for financial intermediaries, b) supervision and monitoring of functioning of stock exchanges. The reforms initiated by SEBI have met with only limited success. The main reasons for this are: · The reforms are piecemeal and do not fit into a larger cohesive plan of action. · The reforms are hastily conceived and implemented, without adequate time and effort being spent on wider consultations and feedback form market participants and experts. · The reforms attempt to make minor changes in the current antiquated method of operation of the markets, which create more friction and confrontation and little real benefit it terms of making markets more efficient. Need for New Focus: The mission of SEBI needs to be reinterpreted as making the Indian securities markets informationally more efficient. This implies that SEBI should attempt to ensure that: · Reliable information is available to all market participants with increasing frequency. · The cost of transactions in the market is reduced and the ease of transactions is improved. Achieving the Mission: A Radical departure from the current method of functioning is needed to achieve the new mission. The strategic shift in SEBI's plans would involve the following: · Giving top priority to use of Information Technology to bring in scrip-less trading and computerized clearance and settlement trading systems. · Bringing the accounting and corporate disclosures standards on par with standards in the developed securities markets. · Restructuring the markets to achieve an integrated, automated system of trading in all types of securities to ensure best possible service to all investors through greater competition and improved dissemination of information. · Professionalizing the financial analysts function through training programmes. · Changing the staffing pattern of SEBI by recruiting professionals rather than depending on personnel on deputation from various government departments. Role of the Government: To ensure that SEBI does not get degraded by personal ambitions and the pressure of the larger system, the government must do the following: · Clearly define the role and jurisdiction of the various agencies that have supervisory and regulatory authority over various aspects of the securities industry. · Change the composition of the Board to include experts from the field of finance, accounting and economics. · Ask SEBI to prepare a five year perspective plan with details about reforms contemplated and their schedule of implementation.